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A Deeper Look Into The Curve Hack:
CRV The Curve hack. We've mentioned this, but let's delve into the details.
Overall โ nothing new. The market once again faces aย hacking issue, but this time it's one of the leaders of the DeFi sector, which, of course, doubles the weight of consequences. If the situation doesn't get worse,ย the market is very lucky.
Will Curve survive the hack?ย Curve lost ~50% of itsย TVL, from 1.8M ofย ETHย to ~900K. In other words, theย TVL decreased from ~$3.1 billion to ~$1.63 billion in a dayย due to the overnight attack, leading to a large number of liquidations. Currently, the TVL is around $1.8 billion, butย the threats have not disappeared. So what was the attack?
The hacker attacked the stablecoin pools of the DEX Curve Finance andย extracted about $47 millionย from various pools using a flaw in the Vyper program code:ย crv/eth, aleth/eth, mseth/eth, peth/eth.
What does this information give us?
The glitch in Vyper suggests that nearly all protocols penned in the Vyper smart contract language areย immediately vulnerable to this menace. For instance,ย Uniswap, utilizing Solidity, remains immune.
Subsequently, Vyper 0.3.7+ underwent repairs and auditing. However, thisย doesn't guarantee its absolute safety.
Despite the hack being a thing of the past, it's prudent to tread carefully with your DeFi activities in the near future. There's aย looming riskย of a flurry ofย liquidationsย in protocols where CRV serves as collateral. We hope it doesn't escalate to that extent, as it would beย detrimental to all.
What's the risk?ย And why is the founder "offloading" the asset?
Michael Egorov, the founder of Curve Finance, is selling CRV tokens off-exchange at a rate ofย $0.4 per token. Today's price:ย ~$0.56
But why?ย To convert CRV toย USDT, which he subsequently uses to repay his FRAXlend loan.
Egorov took out aย $12 million FRAX loanย on FRAXlend, collateralized by 46.6 million in CRV. This loan teeters on the brink of forced liquidation at a rate of $0.43, with a likelihood of 99.9%.
Egorov has repaid over 8 million FRAX whileย continuing to actively offload CRV.
Theoretically, this strategy willย mitigate the risk of loan liquidation and extend the process.
Yet, there's more to it!
Altogether, Egorov has pledged roughlyย 440 million CRVย (47% supply) to the subsequent platforms:
305 million CRV to AAVE โ 70 million USDT/USDC;
63.5 million CRV to Abracadabra โ 18.7 million MIM;
46.6 million CRV to Fraxlend โ 12 million FRAX;
25 million to Inverse โ 7.7 million Dola.
The forced liquidation of such a volume of CRV at a rate beneath the market canย significantly impact not only the asset's price but also the financial stabilityย of certain other protocols.
TL;DR:ย Litecoin is about to undergo its halving event, but the excitement and price surge typically associated with such events seem to be lacking, with only a modest increase in price. Curve Finance, a leading DeFi protocol, experienced a hack resulting in a loss of around $47 million from various pools. The hack exposed a vulnerability in the Vyper smart contract language, potentially putting other protocols using Vyper at risk.